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Wednesday, February 16, 2011

Tekelec (NASDAQ:TKLC) Q1 2011 Target Price

Recent price: 8.47$

P/E Ratio: 38.91

3 Months Target Price: 13$

Company Description

According to their website, Tekelec is found at the heart of most global networks, Tekelec’s market-leading, mission-critical, high-performance network solutions enable the secure and instant delivery of calls and text messages for more than one billion mobile and fixed-line subscribers. The company’s session management solutions allow telecom operators to manage the diverse applications, devices, technologies and protocols, across existing and evolving networks, to meet the demands of today’s consumer. Tekelec uniquely ensures telecom operators have a clear migration path to SIP-based IP networks, and whatever comes next, with the flexibility to deploy solutions at a pace dictated by their business needs.

Confidence Margins

Strong resistance $14.55 (+72%)

Light resistance $13.28 (+57%)

Light support $8.25 (-3%)

Strong support $7.96 (-6%)

Recommendation

Tekelec gave a very poor guidance to analysts and the investment community in general. What can be notice is that the company has already suffered much of the downside it could handle, assuming the company performs at least in the range of the guidance provided by the management, there should be a slow and gradual raise in the stock price that will yield good results for investors.

Entry strategy

For the cautious investor:

Buy the stock for 9$ or less.

For the risk-taking trader:

The May 2011 10$$ out-of-the-money call option contract seems to be the right position to take, they can be acquired for about 40$ per contract.

Exit Strategy

For the cautious investor:

Sell when the stock reaches 13$, or keep it until 54$ if you are more bullish in your own analysis. It is highly recommended to keep the position on check if it goes sour.

For the risk-taking trader:

The contracts should be kept until the underlying reaches around 13$. This should provide a very interesting return if the underlying reaches the target price as the contracts will get in the money.

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Disclaimer

I am not a licensed investment advisor, so please consult with an investment professional before you invest your money. This site is for educational use only - any opinion here should not be treated as an investment advice. We are not liable for any losses suffered by any party because of recommendations published on this blog. Past performance is not a guarantee of future performance. Unless your investments are FDIC insured, they may decline in value.